"The smartphones going into the world's next two billion pairs of hands may not belong to either Google or Apple, but to Mozilla. The Mozilla Foundation, which oversees open source software projects like the Firefox Web browser, expects to release a mobile operating system for smartphones early next year. Its target market is Latin America, then the rest of the developing world, where smartphones from Apple and Google are still too expensive for most people." Let's hope so, because at the rate things are currently going, we'll end up with like 90% Android, 9% iOS, and 1% other stuff. Who wants that?

Hmm stick to the truth, that might be true for AOT (ahead of time) compiled JS, but you'd have to modify your JS code slightly to make that happen. Highly dynamic languages like JS don't compile very well. FirefoxOS will not run anything like that. It will run Mozillas JS engine and it nowhere near as fast as compiled C or just in time compiled Java. Cold hard truth.

Java is statically typed and the bytecode takes advantage of that. Also, Android uses Dalvik, which has a completely different bytecode, designed for faster interpretation. E.g. it's register-based rather than stack-based.
Not that bytecode interpretation speed matters much, as both Dalvik and Gecko have JITs. But it's a lot easier to make Java code go fast than it's for JS code.

having everything in HTML5/js is likely to be heavier (in term of CPU/RAM) than Android's Java stack or iOS's objective C.
How does this help building a cheap phone ?

It doesn't.

But Mozilla has a long-time disconnect with what the mobile needs are. Remember, they already had two abortive attempts at mobile browser ...each time basically shrugged and said "oh well, we'll just wait for more powerful hardware" - meanwhile, Opera and Webkit took over, providing good experience on the typical hardware that was available (and that class of hardware will likely still get more dominating - most of the 5+ billion mobile subscribers use very basic phones, majority of those who upgrade don't move to top smartphones)

In the coming years, inexpensive Chinese Androids will also provide that good experience, they are already pumped into developing world in great numbers.

Also, most of those 5+ billion mobile subscribers are on prepaid and rather frugal with data, they likely DON'T WANT WEBAPPS (OTOH, local or at most RSS-style Android apps could fit more, I guess)